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MP55202
MAPS COFFEE & SANDWICH SHOPS : UK SEPTEMBER 2002
Overview

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This report covers: coffee shops, sandwich shops, snacks,

Companies covered include: BB's Coffee & Muffins, Café Nescafé, Café Nero Group, Coffee Republic, Costa, Puccino's, Starbucks Coffee Company, Benjy's Group, Greggs, O'Briens Irish Sandwich Bars, Pret a Manger, Subway, Benugos, Philpotts, Quiznos,

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TABLE OF CONTENTS

1. Introduction 8
BACKGROUND 8
DEFINITIONS 8
2. Strategic Overview 9
KEY ISSUES 9
Popularity of Snacking 9
Meals Eaten Out 9
Table 1: Number of Meals Eaten Out in the UK by Type of Outlet (million and percent), 2001 10
Lunch Breaks 11
The Purchase of Lunch 11
Table 2: Leading Sources of Purchase for Lunch in England and Wales by Region ( percent of workers), 2002 11
Food Choices 12
Table 3: The Top Ten Food Choices for Lunch in the UK ( percent of workers consuming), 2000 and 2002 12
Figure 1: The Top Ten Food Choices for Lunch in the UK ( percent of workers consuming), 2000 and 2002 13
Broadening the Product Offering 14
Urban London Bias 15
Table 4: Profile of Coffee and Sandwich Shop Users in Great Britain by Region ( percent of adults), 2002 15
Low Profits Perhaps Only Temporary 16
MARKET SIZE AND SEGMENTATION 17
Table 5: Retail Sales of Branded Coffee and Sandwich Shop Chains in the UK by Value at Current Prices (£m and percent), 1996-2001 18
Figure 2: Retail Sales of Branded Coffee and Sandwich Shop Chains in the UK by Value at Current Prices (£m), 1996-2001 18
Table 6: Number of Branded Coffee and Sandwich Shop Chain Units in the UK, August 1999, December 2000 and March 2002 19
Figure 3: Number of Branded Coffee and Sandwich Shop Chain Units in the UK, August 1999, December 2000 and March 2002 19
ADVERTISING AND PROMOTION 20
CONSUMER PROFILE 21
Table 7: Users of Coffee Shops and Sandwich Bars in Great Britain ( percent of adults), 2002 22
Table 8: Coffee Shop and Sandwich Bar Users in Great Britain by Sex, Age, Social Grade and Region ( percent of adults), 2002 23
3. Coffee Shops 25
MARKET SIZE 25
Table 9: Retail Sales of Branded Coffee Shop Chains in the UK by Value at Current Prices (£m and percent), 1996-2001 25
TYPE OF PRODUCTS SOLD 25
DISTRIBUTION 26
Table 10: Consumption of Hot Beverages Out of the Home in the UK by Type of Outlet by Volume ( percent), 2002 26
Figure 4: Consumption of Hot Beverages Out of the Home by Type of Outlet by Volume ( percent), 2002 27
MAJOR PLAYERS 27
Table 11: Leading Players in the UK Multiple/Branded Coffee Shop Market by Number of Outlets, August 1999, December 2000 and March 2002 28
4. Sandwich Shops 29
MARKET SIZE 29
Table 12: Retail Sales of Branded Sandwich Shop Chains in the UK by Value at Current Prices (£m and percent), 1996-2001 29
TYPE OF PRODUCTS SOLD 30
Prepacked Versus Freshly Made 30
Sandwich Sales by Type and Filling 30
Table 13: Sandwich Sales in the UK by Type of Product and Outlet by Volume ( percent), 2001 31
DISTRIBUTION 32
Table 14: Sandwich Sales in the UK by Type of Outlet by Volume ( percent), 1999-2001 33
MAJOR PLAYERS 34
Table 15: Leading Players in the UK Multiple/Branded Sandwich Shop Market by Number of Outlets, December 2000 and March 2002 34
5. An International Perspective 36
TRENDS IN MAJOR COUNTRIES 36
Germany 36
Table 16: Leading Players in the German Multiple/Branded Sandwich Shop Market by Number of Outlets, January 2002 36
France 37
Coffee Shops 37
Sandwich Shops 37
Table 17: Sandwich Sales in France by Type of Outlet by Volume ( percent), 2001 37
Figure 5: Sandwich Sales in France by Type of Outlet by Volume ( percent), 2001 38
The US 38
Coffee Shops 38
Sandwich Shops 39
Japan 40
Coffee Shops 40
Sandwich Shops 41
6. PEST Analysis 42
POLITICAL FACTORS 42
European Legislation 42
Fair Trade Coffee 42
ECONOMIC FACTORS 43
Table 18: Main UK Economic Indicators (£bn and percent), 1995-2004 43
SOCIAL FACTORS 44
Growing Number of Working Women 44
Presence of Children 44
Household Size and Composition 45
Table 19: Number of Households in England by Composition (000),1971, 1981, 1991, 1996, 2011 and 2021 45
TECHNOLOGICAL FACTORS 45
Infrastructure Systems 45
Enhanced Coffee Offerings 45
7. Consumer Dynamics 47
INTRODUCTION 47
Table 20: Summary of Survey Findings ( percent of respondents), 2002 47
MORE PEOPLE VISIT SANDWICH SHOPS AT LUNCHTIME THAN IN THE MORNING 48
Table 21: Normal Time of Day for Visiting Sandwich Shops ( percent of respondents), 2002 49
FREQUENCY OF USING COFFEE SHOPS 51
Table 22: Frequency of Using Coffee Shops ( percent of respondents), 2002 52
PREFERENCE FOR EATING IN AT COFFEE SHOPS 54
Table 23: Eating in at Coffee Shops Versus Taking Away ( percent of respondents), 2002 55
MORE PEOPLE VISIT COFFEE SHOPS DURING LEISURE TIME THAN DURING THE WORKING DAY 57
Table 24: Visiting Coffee Shops During the Working Day and During Leisure Time ( percent of respondents), 2002 58
PREFERENCE FOR MADE-TO-ORDER SANDWICHES 60
Table 25: Made-to-Order Sandwiches Versus Prepacked ( percent of respondents), 2002 61
FREQUENCY OF BUYING SANDWICHES FROM SANDWICH SHOPS 63
Table 26: Frequency of Purchase From Sandwich Shops ( percent of respondents), 2002 64
CHANGES IN FREQUENCY IN VISITING SANDWICH SHOPS 66
Table 27: Visiting Sandwich Shops ( percent of respondents), 2002 67
PREFERENCE FOR TAKING AWAY FROM SANDWICH SHOPS 69
Table 28: Taking Away From Sandwich Shops Versus Eating In ( percent of respondents), 2002 70
8. Company Profiles 72
COFFEE SHOPS 72
BB's Coffee & Muffins Ltd 72
Corporate Strategy 72
Profitability 72
Table 29: Financial Results for BB's Coffee & Muffins Ltd (£000 and number), Years Ending 31st March 1998-2001 72
Future Developments 72
Café Nescafé 73
Caffe Nero Group PLC 73
Corporate Strategy 73
Profitability 73
Table 30: Financial Results for Caffe Nero Group PLC (£000 and number), Years Ending 31st May 2000-2002 74
Future Developments 74
Coffee Republic PLC 74
Corporate Strategy 74
Profitability 75
Table 31: Financial Results for Coffee Republic PLC (£000 and number), Years Ending 31st March 1998-2001 75
Future Developments 75
Costa Ltd 76
Corporate Strategy 76
Profitability 76
Table 32: Financial Results for Costa Ltd (£000 and number), Years Ending 27th February 1999, 4th March 2000, 3rd March 2001 and 2nd March 2002 76
Future Developments 76
Puccino's Ltd 77
Corporate Strategy 77
Profitability 77
Table 33: Financial Results for Puccino's Ltd (£000 and number), Years Ending 3rd January 1999, 2nd January 2000, 31st December 2000 and 30th December 2001 78
Future Developments 78
Starbucks Coffee Company (UK) Ltd 78
Corporate Strategy 78
Profitability 79
Table 34: Financial Results for Starbucks Coffee Company (UK) Ltd (£000 and number), Years Ending 28th December 1997, 13th September 1998, 19th September 1999 and 24th September 2000 79
SANDWICH SHOPS 80
Benjy's Group Ltd 80
Corporate Strategy 80
Profitability 80
Table 35: Financial Results for Benjy's Group Ltd (£000 and number), Years Ending 31st January 1998 and 31st March 1999-2001 80
Future Developments 81
Delifrance (UK) Ltd 81
Corporate Strategy 81
Profitability 81
Table 36: Financial Results for Delifrance (UK) Ltd (£000 and number), Years Ending 31st December 1998-2001 81
Greggs PLC 82
Corporate Strategy 82
Profitability 82
Table 37: Financial Results for Greggs PLC (£000 and number), Years Ending 2nd January 1999, 1st January 2000, 30th December 2000 and 29th December 2001 82
Future Developments 83
O'Briens Irish Sandwich Bars (UK) Ltd 83
Corporate Strategy 83
Profitability 83
Table 38: Financial Results for O'Briens Irish Sandwich Bars (UK) Ltd (£000 and number), Years Ending 31st December 1998-2001 83
Future Developments 84
Pret A Manger (Europe) Ltd 84
Corporate Strategy 84
Table 39: Number of Pret A Manger Outlets in the UK by Town, 2002 84
Profitability 85
Table 40: Financial Results for Pret A Manger (Europe) Ltd (£000 and number), Years Ending 31st December 1998-2001 86
Future Developments 86
Subway 86
Corporate Strategy 86
Future Developments 87
Table 41: Number of Subway Outlets in the UK and the Republic of Ireland by Region, September 2002 87
Other Sandwich Shop Companies 87
Benugos 87
Philpotts 88
Quiznos 88
9. The Future 89
OUTLET GROWTH 89
CORPORATE STRATEGY 90
MARKET SIZE 90
Table 42: Forecast Retail Sales of Branded Coffee and Sandwich Shops in the UK by Value at Current Prices (£m and percent), 2002-2005 91
Figure 6: Forecast Retail Sales of Branded Coffee and Sandwich Shops in the UK by Value at Current Prices (£m), 2002-2005 91
10. Further Sources 92
Companies 92
Publications 93
General Sources 93
Bonnier Information Sources 94
Government Publications 95
Other Sources 96

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EXECUTIVE SUMMARY

There has been phenomenal growth in the branded coffee and sandwich shop chain sector. The culmination of factors associated with a `cash rich, time poor' society, the requirements for food on the go, availability of sites and willingness of operators to invest in them, and the emergence of a café society have all contributed towards this growth.
In 2001, the total market reached a retail sales value of £730.1m — an 836 percent increase since 1996. The willingness of the chain operators to invest in new site openings is a key factor behind market growth. By March 2002, the number of sites had reached 1,990, compared with 751 in August 1999.
Although a number of the chains rarely carry out conventional brand or product advertising, customers have a strong image of some of the brands and their personalities. The mere fact that a number of these chains have several outlets in central locations throughout the UK contributes in a significant way to their strong brand image. Efforts to win consumer loyalty are likely to increase in the next year as the competitive trading climate furthers the need for brand strength and differentiation by the major coffee operators.
Coffee shop chains, in particular, have sought to diversify the product mix they offer customers. This is not only more interesting and convenient for the consumer, but also provides the retailer with better gross margins. Sandwich shops have also branched out into other products, such as soups, salads and cakes. However, sandwich and, to a lesser extent, coffee shops face strong competition from the major grocery retailers.
Statistics relating to total sandwich sales suggest that prepacked sandwiches are gaining popularity. It is possible that this growth is being driven by consumers who are purchasing sandwiches during lunch breaks or en-route somewhere, and do not have sufficient time to wait for sandwiches to be freshly prepared. Prepacked sandwiches accounted for around two-thirds of sandwiches sold in 2001. However, they are less important in sandwich shops, accounting for 43 percent of sandwiches sold. In Pret A Manger, most of the sandwiches are prepacked to fit in with the chain's streamlined/standardised operations.
Sandwich and coffee shops are competing with a large number of outlets serving the eating-out market. Around 2.29 billion meals were served away from home in 2001. Sandwich bars/bakeries only constituted 0.8 percent of this total, with other cafés/coffee shops (largely made up of independents) representing a further 4.4 percent. In the sandwich market, sandwich shops (including branded chains and independents combined) lost some market share, in volume terms, during 2001.
Key Note forecasts that the branded coffee and sandwich shop chain market will enjoy healthy growth between 2002 and 2005. However, there will be a significant slowdown in the rate of growth compared with the period 1996 to 2001, during which the sector was starting from a far smaller and underdeveloped base. Growing concentration is expected to continue, with acquisitions and/or substantial investments by a number of the major players.

Text © 2002 MAPS

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